Opinion
No. COA10-1049
Filed 7 June 2011 This case not for publication
Appeal by defendants from judgment entered 6 April 2010 by Judge Richard D. Boner in Mecklenburg County Superior Court. Heard in the Court of Appeals 26 January 2011.
Gallivan, White Boyd, P.A., by James M. Dedman, IV and Nicole Judd Buntin, for Plaintiffs-Appellees. Law Office of H. Morris Caddell, Jr., by H. Morris Caddell, Jr., for the Defendants-Appellants.
Mecklenburg County File No. 09 CVS 25800.
Defendants, Piedmont Endocrinology Medical Associates, P.A., and Piedmont's President, Godwin Uzomba, M.D., appeal from a judgment entered by the trial court on 6 April 2010 confirming an arbitration award in favor of Plaintiffs Aetna Health of the Carolinas, f/k/a Aetna U.S. Healthcare of the Carolinas, Inc., and Aetna Health, Inc., f/k/a Aetna Health Management, Inc., and granting Plaintiffs' motion to recover reasonable costs and attorney's fees from Defendants. On appeal, Defendants contend that the trial court erred by failing to conclude that the arbitrator exceeded her authority by failing to recognize that Plaintiffs' claims lacked validity under the Employee Retirement Income Security Act of 1974 (ERISA) and were barred by the applicable statute of limitations, by failing to conclude that Plaintiffs' claims were preempted by ERISA, and by failing to make adequate findings of fact to support the award of attorney's fees. After careful consideration of Defendants' challenges to the trial court's order in light of the record and the applicable law, we conclude that the trial court's order should be affirmed.
I. Factual Background
On 20 May 2003, Plaintiffs, an insurance company providing insurance benefits to individuals and entities located within Mecklenburg County, entered into a Physician Group Agreement (PGA) with Defendants. Pursuant to the PGA, Defendants agreed to serve as participating providers in Plaintiffs' provider networks in exchange for payment for covered services rendered to Plaintiffs' members. The PGA further provides that the payor, ordinarily Plaintiffs, "shall have final authority to determine whether any services provided by Participating Group Providers [PGP] were Covered Services and to adjust or deny payment for services rendered by [PGPs] to Members in accordance with such determinations." According to Section 10.2.1 of the PGA:
. . . . Any controversy or claim arising out of or relating to this Agreement or the breach, termination, or validity thereof, except for temporary, preliminary, or permanent injunctive relief or any other form of equitable relief, shall be settled by binding arbitration administered by the American Arbitration Association ("AAA") and conducted by a sole arbitrator in accordance with the AAA's Commercial Arbitration Rules ("Rules"). The arbitration shall be governed by the Federal Arbitration Act, 9 U.S.C. §§ 1- 16, to the exclusion of state laws inconsistent therewith or that would produce a different result, and judgment on the award rendered by the arbitrator may be entered by any court having jurisdiction thereof.
After the parties entered into the PGA, a dispute relating to Defendants' submission of claims associated with the performance of a series of procedures billed under CPT Code 95904, the code applicable to sensory nerve conduction studies, arose between the parties. After reimbursing Defendants for the performance of these procedures, Plaintiffs discovered that the procedures in question were not, in fact, sensory nerve conduction studies, but instead were incorrectly coded and billed under CPT Code 95904. Plaintiffs further determined that the procedures actually performed by Defendants were not covered under the PGA and would not have been subject to reimbursement if correctly coded. As a result, Plaintiffs filed a demand for arbitration seeking to recover $136,344.52 from Defendants relating to incorrectly coded, non-covered procedures performed between December 2003 and July 2007.
In the ordinary course of events, when participating providers, such as Defendants, submit claims for reimbursement in connection with services provided to group members, they utilize Common Procedure Terminology (CPT) codes to describe the service or services provided. According to the American Medical Association, which publishes a manual containing CPT codes for various medical procedures, CPT coding is "the most widely accepted medical nomenclature used to report medical procedures and services under public and private health insurance programs." American Medical Association, About CPT, http://www.ama-assn.org/ama/pub/physician-resources /solutions-managing-your-practice/coding-billing-insura nce/cpt/about-cpt.shtml.
An arbitration hearing was held on 1 and 2 July 2009. At this hearing, Defendants were represented by counsel and did not object to the use of arbitration to resolve the dispute between the parties. On the contrary, Defendants asserted a counterclaim against Plaintiffs during the proceedings before the arbitrator. The record indicates that "each party affirmatively agreed to [the] Arbitrator[,]" that the arbitrator heard testimony from witnesses presented by both parties, and that both parties introduced exhibits into evidence for the arbitrator's consideration. After "hear[ing] the testimony of the witnesses and [reviewing] the exhibits and the post hearing briefs of the parties," the arbitrator entered an award on 6 August 2009 requiring Defendants to pay Plaintiffs the full amount that Plaintiffs claimed and rejecting Defendants' counterclaim.
After Defendants failed to make the payments required by the arbitrator's award, Plaintiffs filed a complaint and a motion seeking confirmation of the arbitration award in Mecklenburg County Superior Court in late 2009. On 6 January 2010, Defendants filed an answer in which they denied that Plaintiffs were entitled to enforce the arbitrator's award, asserted a number of affirmative defenses, and requested that "all or part of the Award of Arbitrator" be set aside. Although Defendants admitted that "the arbitration . . . was supposed to be a binding arbitration if conducted in accordance with the rules and provisions of the [PGA] and the [AAA,]" they denied that "the arbitration [had been] conducted in such a manner" and alleged that:
10. . . . Defendants deny that [Plaintiffs are] entitled to an order confirming the Award of Arbitrator, or entering judgment jointly or severally against each Defendant.
11. Affirmatively, the Defendants assert that the Award of Arbitrator reflects an arbitrary and capricious action and decision by the arbitrator in that, inter alia, the arbitrator ignored and or misapplied the North Carolina statute of limitations applicable to this case and allowed recovery by [Plaintiffs] for services rendered more than 3 years prior to the institution of the arbitration claim.
. . . .
13. Affirmatively, the Defendants assert that the Award of Arbitrator reflects an arbitrary and capricious action and decision by the arbitrator in that, inter alia, the arbitrator ignored and or misapplied certain provisions of [ERISA],, and the regulations promulgated thereunder, applicable to this case and allowed recovery by Aetna in violation of rules and regulations governing employee welfare and health benefits under ERISA.
Plaintiffs responded by filing a motion to strike Defendants' defenses, withdrawing their original motion to confirm the arbitration award, and filing an amended motion seeking confirmation of the arbitrator's award in which they requested that the trial court:
confirm the award and enter judgment against [Defendants] in the total sum of [$136,344,52] plus interest as provided by law from the date of entry of this judgment. Pursuant to [N.C. Gen. Stat.] § 1-569.25, and because Defendants now seek to challenge the award on various grounds, [Plaintiffs] seek[] the recovery of reasonable costs of the motion and subsequent judicial proceedings as well as reasonable attorneys' fees and other reasonable expenses of litigation incurred in a judicial proceeding after the award is made to a judgment confirming the award.
The issues raised by the parties' pleadings came on for hearing before the trial court during the 4 March 2010 civil session of the Mecklenburg County Superior Court. After providing all parties with an opportunity to be heard, the trial court entered a judgment stating that:
1. The Court finds no basis on which to vacate the August 6, 2009 arbitration award under [N.C. Gen. Stat.] § 1-569.23(a), and therefore, confirms the arbitration award in the amount of [$136,344.52] under [N.C. Gen. Stat.] § 1-569.22.
2. The Court finds that [Plaintiffs are] also entitled to recover reasonable costs and attorneys' fees in the amount of $11,736.40 incurred as a result of this litigation to confirm the arbitration award, which Defendants contested, pursuant to [N.C. Gen. Stat.] § 1-569.25. The Court finds that these fees are reasonable based on the information provided in the affidavit of [Plaintiffs'] counsel, Nicole Judd Buntin.
3. Judgment is hereby entered in favor of [Plaintiffs] and against [Defendants], jointly and severally, in the sum of $148,080.52 plus interest as provided by law from the date of entry of this judgment.
Defendants noted an appeal to this Court from the trial court's judgment.
II. Legal Analysis A. Confirmation of an Arbitration Award
In their first challenge to the trial court's judgment, Defendants argue that the trial court erred by confirming the arbitration award on the grounds that the arbitrator exceeded her authority in rendering a decision for Plaintiffs. We disagree.
1. Applicable Legal Principles
At the outset, we note that the PGA includes language indicating that it is governed by the Federal Arbitration Act (FAA). Pursuant to the FAA, which is codified in 9 U.S.C. §§ 1- 16, "any party to [an] arbitration may apply to the court so specified for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title." 9 U.S.C. § 9. In reviewing a trial court's decision confirming an arbitration award, we "accept the trial court's findings of fact that are not clearly erroneous and review its conclusions of law de novo." First Union Securities, Inc. v. Lorelli, 168 N.C. App. 398, 400, 607 S.E.2d 674, 676 (2005) (citing Carpenter v. Brooks, 139 N.C. App. 745, 751, 534 S.E.2d 641, 646, disc. review denied, 353 N.C. 261, 546 S.E.2d 91 (2000)).
A trial court's authority to revisit decisions made by an arbitrator is sharply limited by the relevant provisions of the FAA. According to 9 U.S.C. § 10(a), an award may be vacated:
(1) where the award was procured by corruption, fraud, or undue means;
(2) where there was evident partiality or corruption in the arbitrators, or either of them;
(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any part have been prejudiced; or
(4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.
According to Defendants, a trial court may vacate an arbitration award pursuant to 9 U.S.C. § 10 in the event that the arbitrator "exceeded her power by sustaining claims that: (1) were otherwise barred by the applicable statute of limitations; and/or (2) were the result of an arbitration process that ran afoul of the procedural requirements of [ERISA]." We do not find Defendants' arguments persuasive given the record that is before us for review.
2. Standard of Review
In evaluating Defendants' arguments, we must keep in mind the well-settled principle that "[j]udicial review of an arbitration award is severely limited in order to encourage the use of arbitration and in turn avoid expensive and lengthy litigation[,]" so that "`an arbitration award is presumed valid, and the party seeking to vacate it must shoulder the burden of proving the grounds for attacking its validity.'" First Union, 168 N.C. App. at 400, 607 S.E.2d at 676 (2005) (citing Remmey v. PaineWebber, Inc., 32 F.3d 143, 146 (4th Cir. 1994), cert denied, 513 U.S. 1112, 130 L. Ed. 2d 786, 115 S. Ct. 903 (1995) and quoting Carpenter, 139 N.C. App. at 751, 534 S.E.2d at 646)); see also Turner v. Nicholson Properties, Inc., 80 N.C. App. 208, 211, 341 S.E.2d 42, 45 (stating that "`[a] foundation of the arbitration process is that by mutual consent the parties have entered into an abbreviated adjudicative procedure, and to allow "fishing expeditions" to search for ways to invalidate the award would tend to negate this policy'") (quoting Fashion Exhibitors v. Gunter, 291 N.C. 208, 217, 230 S.E.2d 380, 387 (1976)), disc. Review denied, 317 N.C. 714, 347 S.E.2d 457 (1986). In addition, the "general rule [is] that `errors of law or fact, or an erroneous decision of matters submitted to [arbitration], are insufficient to invalidate an award fairly and honestly made.'" Turner, 80 N.C. App. at 212, 341 S.E.2d at 45 (quoting Fashion Exhibitors v. Gunter, 41 N.C. App. 407, 411, 255 S.E.2d 414, 417-18 (1979)). Thus, an arbitrator's award may not be set aside simply because he or she erroneously made a legal decision or factual determination.
3. Statute of Limitations
According to Defendants, the arbitrator erred in "apply[ing] the law of North Carolina" by entering an award based on claims barred by the applicable statute of limitation and, by committing this error, exceeded her power as an arbitrator. However, this argument is completely foreclosed by the decisions construing the applicable statutory provisions of both state and federal law governing arbitrations. According to well-established legal principles governing judicial enforcement of arbitration awards, "legal arguments are not grounds for vacating an arbitration award[,]" "`an arbitrator is not bound by substantive law or rules of evidence,'" and, "`[w]here an arbitrator makes such a mistake, it is the misfortune of the party.'" Smith v. Young Moving and Storage, Inc., 167 N.C. App. 487, 489-90, 606 S.E.2d 173, 175-76 (2004) (quoting Sholar Bus. Assocs. v. Davis, 138 N.C. App. 298, 301, 531 S.E.2d 236, 239 (2000)). Both the appellate and the district court are confined by the federal law favoring arbitration agreements. Courts are allowed to vacate arbitration awards only if they meet the narrow statutory factors set forth in 9 U.S.C. § 10(a) or if the award demonstrates a manifest disregard of applicable law. More specifically, a court's belief that an arbitrator misapplied the law will not justify vacation of an arbitral award. Rather, appellant is required to show that the arbitrator was aware of the law, understood it correctly, found it applicable to the case before them, and yet chose to ignore it in propounding their decision. In Cameron v. Griffith, 91 N.C. App. 164, 370 S.E.2d 704 (1988), we rejected an argument identical to the one advanced by Defendants in this case, explaining that the "arbitrator's mistake either as to law or fact [was the] misfortune of the party[, and] [t]hus[] the arbitrators' mistake, if any, as to the statute of limitations was a hazard that respondents assumed when they agreed to arbitration[.]" Cameron, 91 N.C App. at 165, 370 S.E.2d at 705 (internal quotation marks and citations omitted). As a result, in light of the clear import of our prior decisions and Defendants' failure to cite any authority tending to suggest the appropriateness of a contrary result, we conclude that the arbitrator's alleged failure to properly apply the applicable statute of limitations provides no justification for a decision vacating the arbitrator's award pursuant to 9 U.S.C. § 10(a).
4. ERISA
In addition, Defendants contend that the arbitrator exceeded her authority by acting inconsistently with the procedural requirements of ERISA and by failing to recognize that the provisions of ERISA preempted the legal principles upon which she relied in rendering her award. At bottom, Defendants contend that ERISA applies to Plaintiffs' claims and preempts the procedures utilized by, and the legal principles that underlie, the arbitrator's award because Plaintiffs' claims rest upon health plans which are, at least in part, subject to ERISA. Although the parties advance differing views concerning whether the resolution of Plaintiffs' claims hinge upon the provisions of these health plans or whether the legal principles upon which the arbitrator relied are subject to ERISA preemption both substantively and procedurally, we need not resolve these issues because, even if Defendants are correct about the potential relevance of ERISA to the proper resolution of this case, the record before this Court contains absolutely no evidence that any of the health plans in question are subject to ERISA. During the course of their oral argument, Defendants acknowledged, in response to questions from the panel, that the record presented for our review does not establish the relevance of ERISA to the matters at issue before the arbitrator. In light of this, Defendants requested that we remand this matter to the trial court in order to permit a determination of the extent, if any, to which these health plans are, in fact, governed by ERISA. As a result of the fact that our review is limited to "the record on appeal, the verbatim transcript of proceedings, if one is designated, and any other items filed pursuant to [] Rule 9," N.C.R. App. P. 9(a), and the fact that Defendants have had an adequate opportunity to develop the record necessary to support their position, we elect not to overlook this fundamental deficiency in the record developed in the court below and presented for our review. Since the validity of Defendants' argument to the effect that the arbitrator exceeded her authority by acting in contravention of the procedural requirements of ERISA and by failing to recognize that ERISA preempted the legal principles upon which the arbitrator relied in ruling in favor of Plaintiffs necessarily hinges on a preliminary determination that ERISA has some relevance to Plaintiffs' claims against Defendants and since the record does not establish that any of the health plans upon which Defendants rely in advancing this argument are governed by ERISA, we conclude that this aspect of Defendants' challenge to the trial court's order lacks adequate record support and cannot provide any basis for overturning the arbitrator's award. As a result, we are unable to agree with Defendants' contention that the arbitrator exceeded her authority to such an extent that her award in favor of Plaintiffs should be set aside.
B. Attorney's Fees
Secondly, Defendants argue that the trial court erred in awarding attorney's fees to Plaintiffs by failing to make adequate findings of fact in support of this determination. Once again, we disagree with Defendants' contention.
According to N.C. Gen. Stat. § 1-569.25(c), a trial court may award reasonable attorney's fees "on motion of a prevailing party to a contested judicial proceeding under [N.C. Gen. Stat. § ] 1-569.22[.]" In order for such an attorney's fee award to withstand a challenge on appeal, "the record must contain findings of fact as to the time and labor expended, the skill required, the customary fee for like work, and the experience or ability of the attorney based on competent evidence." Porterfield v. Goldkuhle, 137 N.C. App. 376, 378, 528 S.E.2d 71, 73 (2000) (citations and quotation marks omitted). Since we review a trial court's decision to award attorney's fees for abuse of discretion, Thorpe v. Perry-Riddick, 144 N.C. App. 567, 570, 551 S.E.2d 852, 855 (2001) (citation omitted), our review is "`strictly limited to determining whether the trial judge's underlying findings of fact are supported by competent evidence, in which event they are conclusively binding on appeal, and whether those factual findings in turn support the judge's ultimate conclusions of law.'" Town of N. Topsail Beach v. Forster-Pereira, 194 N.C. App. 763, 766, 670 S.E.2d 590, 592 (2009) (citation omitted).
The trial court made the following finding of fact in its order awarding attorney's fees to Plaintiffs:
2. The Court finds that [Plaintiffs are] also entitled to recover reasonable costs and attorneys' fees in the amount of $11,736.40 incurred as a result of this litigation to confirm the arbitration award, which Defendants contested, pursuant to [N.C. Gen. Stat.] § 1-569.25. The Court finds that these fees are reasonable based on the information provided in the affidavit of [Plaintiffs'] counsel, Nicole Judd Buntin.
As we have previously made clear in Winston-Salem Wrecker Ass'n v. Barker, 148 N.C. App. 114, 118-19, 557 S.E.2d 614, 617-18 (2001), the fact-finding requirement discussed above is satisfied when the trial court incorporates by reference the motions and affidavits of the party requesting fees into its order. Although it may be preferable for a trial judge seeking to utilize this approach to explicitly incorporate any pertinent motions and affidavits into its order addressing the attorney's fees issue, see Darden v. Darden, 66 N.C. App. 432, 436, 311 S.E.2d 600, 603 (1984) (upholding an award of attorney's fees based upon findings "that plaintiff's attorney . . . has rendered necessary and valuable legal services as evidenced by the attached affidavit which is incorporated into this order as a finding of fact by reference the same as if fully set out herein"), his or her failure to adopt this approach does not render the resulting order fatally defective. Winston-Salem Wrecker Ass'n, 148 N.C. App. at 118-19, 557 S.E.2d at 617-18 (finding that the trial court made sufficient findings of fact to support an award of attorney's fees by stating that "[t]he Court being of the opinion that said motions should be granted in accordance with the provisions of [N.C. Gen. Stat.] § 6-21.5 upon the grounds raised in said motions and affidavit of [counsel]"). Thus, in making reference to the affidavit of Ms. Buntin's in its order, the trial court effectively found as fact and incorporated the information contained in that document by reference. Ms. Buntin's affidavit contains a detailed description of the work performed by Plaintiffs' counsel, their hourly rates, their prior legal experience, the amount of time that they expended in the course of representing Plaintiffs in this matter, and other items of relevant information. As a result, by essentially adopting the information contained in Ms. Buntin's affidavit into its order awarding attorney's fees to Plaintiffs, the trial court made sufficient findings of fact to support its decision to award attorney's fees to Plaintiff.
III. Conclusion
Thus, for the reasons set forth above, we conclude that the trial court did not err by entering an order confirming the arbitration award or by granting Plaintiffs' request for attorney's fees. As a result, the trial court's order should be, and hereby is, affirmed.
AFFIRMED.
Judges ELMORE and STEELMAN concur.
Report per Rule 30(e).